Tar Heel Stock-Picking: National Oilwell Varco, Atwood Oceanics

Here's a look at the University of North Carolina's Applied Investment Management program's best-performing stock holdings.

While the Tar Heels may be a best known college basketball program, there's another team at the University of North Carolina at Chapel Hill that's worth looking at.

UNC's Applied Investment Management (AIM) program enables the school's best and brightest MBAs to mange over $1 million in real capital . Here's a look at how the AIM class of 2008 picked their best-performing stock holdings.

AIM Quick Facts

Established: Early 1950s

Membership: 24

Money under management: $1.9 million (approximate current value)

Benchmark:S&P 500

Number of holdings: Approximately 35 equity names

Time-horizon: Long-term, appreciation

According to AIM student Tom Shohfi, UNC's AIM program is one of the oldest student-run investment funds in the country. The program's original fund, the aptly named Reynolds Fund, was started with "tobacco money in the early 1950s."

The class of 2008 managed two funds in the AIM program (the Reynolds Fund and the Cherry Hill Fund), valued at just over $1.3 million.

While other schools sometimes allow students to use margin in their programs, this past year, AIM's managers were forced to use a vanilla long-only strategy. "We're not allowed to use leverage and we're not allowed to go short with our current rules," explains Shohfi.

Shohfi adds, "The fund can only apply leverage through the use of derivatives and that's limited to two times the assets under management."

"At the current point in time, being a long-only fund is one of our weaknesses, but we're making changes based on how other student-run funds are changing and based on how the industry's changing," says Shohfi.

Even with the fund's limitations, the Tar Heel money managers were able to keep market meltdowns at bay, since they took control of the fund last April -- one of the toughest 12 months investors have seen in a while. One of the biggest ways they managed that was by making good market bets that paid off.

Where is their money now?

Don't Count the Financials Out This Year

Writedowns aside, AIM sees a future in financial stocks over the next six to nine months. "We do like the financials," says Shohfi, "and we established positions in some really beaten down companies that we think can rally significantly." With the financial companies, Shohfi acknowledges that "there's a lot of room for upside because there's certainly been a lot of downside."

Financial names the AIM students like include BB&T ( BBT) and E*Trade ( ETFC) -- two stocks that are up over 20% since January.

But despite those impressive numbers, financials were not what fueled AIM's portfolio performance.

Shohfi and company felt that investing in two oil-centric businesses, such as National Oilwell Varco and Atwood Oceanics was bound to be a good play. And over the past year, it certainly has been. The value of AIM's National Oilwell Varco position is up around 63% and its Atwood Oceanics stake is up around 42%.

"Oil has risen nearly 70% since we took over the fund," notes Shohfi. But with oil lingering around an all-time high, energy is making AIM students a little nervous these days.

"We feel energy has played out, says Shohfi. "We have trimmed AIM's energy holdings , but will likely preserve full portfolio weightings in both these names National Oilwell Varco and Atwood Oceanics . Rigs and exploration were our favorite theme."